The Winter Quarter 2016 issue of the Coyote Economist is now available. The lead article is by Daniel MacDonald, exploring the political economic context of the Fed’s most recent decision to increase the Federal Funds rate. There are also articles on economics scholarships, the honor society ODE, the upcoming alumni get-together, and the spring and summer course schedule.

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The Fall 2015 Coyote Economist has just been published. The lead article, written by Professor James Dulgeroff, looks at the plan by China and the U.S. to reduce greenhouse gases. This edition also has information on the End of the Quarter Party, December commencement, Mr. Noe Nava’s participation in the HACU conference, and the tentative class schedule for Winter and Spring of 2016.

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The Spring Quarter 2015 Coyote Economist has just been published. You’ll find information on student research, the upcoming Seniors Reception, End of the Year Party and Commencement. The main article explores the on-going stagnation and the Neoliberal era.

For me three economists stand out historically as having been the most effective at building resistance to the dominance of scientism in economics. Keynes of course is one, and the other two are Bernard Guerrien and Tony Lawson, Guerrien because he was the intellectual and moral force behind Autisme Economie which, among other things, gave rise to the RWER; and Lawson because his papers, books and seminars have inspired, joined and intellectually fortified thousands.

It is notable that all three of these economists were or were on their way to becoming professional mathematicians before switching to economics. When still in his twenties, Keynes’ mathematical genius was already publicly celebrated, most notably by Whitehead and Russell, and he had already published what was to become for his first discipline a classic work. Guerrien’s first PhD was in mathematics, and Lawson was doing a PhD in mathematics at…

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We just published the Winter Quarter 2015 Coyote Economist. The lead article, written by Daniel MacDonald, focuses on the gap between the myth and the reality of economic mobility within the USA. No, the USA is NOT the much touted land of opportunity. If you want to increase your chances of moving up the economic ladder you should move to Denmark, Norway or Finland. Hell, even Canada offers greater opportunities.

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A colleague of mine pointed me to this interesting gif showing the growth of WalMart stores in the US since 1962. The gif was made available by Daniel Ferry and can be found at Excel Hero. The same gif is also available, along with a sketch of the history and labor practices of Walmart, at Hippototo.

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Good piece by Zaman on the relationship between economic outcomes and economic ideology. One can think of the period from the 1930s to the 1970s as the Keynesian era, and the period since then as the Chicago era (or, more accurately – though clumsily, the Monetarist-Rational Expectations-Real-Business-Cycle era). During the Keynesian era the share of wealth owned by the bottom 90% grew, while the share of wealth owned by the top 0.1% declined. Then, in the current Chicago era the patterns were reversed, with the bottom 90% seeing their share fall while the top 0.1% saw their share rise.

While I’m drawn to the implications suggested by this relationship, I’m not sure that causality is from ideology (or economic theory, if the suggestion that economic theory is ideological seems too extreme) to economic outcomes, mostly because the policies that account for the outcomes in both eras where not necessarily driven by theory. They were instead driven by changes in the balance of power that took place, and is still taking place, between capital and labor. The politics that emerged from that changing balance of power had a bigger impact on the resultant policies of the two eras than the arguments offered by Keynesian or Chicago economists.

The two different ideologies that came to dominate these two eras were more a reflection of the underlying power relationships than a causal force leading to the different policy regimes.

What’s more, while it’s true that economic ideology has gone through a transformation from Keynesianism to Chicagoism it’s a bit of stretch to suggest that Chicagoism was an outcast in the era of Keynes. True, Keynesian theory and policy were dominant in that era, but it was a type of Keynesianism that accepted, in principle, the Chicagoian belief in free markets.

The major difference between these two ideologies, in this regard, was that the Keynesians saw all kinds of imperfections and rigidities interfering with the free market’s ability to do its wonders, while the Chicagoians were confident that, in the real world, free markets move toward full employment. In short, both ideologies accepted the magic of the market. It was just that the Keynesians saw the need for policies that nudge the free market toward outcomes it’s prevented from achieving because of imperfections and rigidities, while the Chicagoians are convinced that real world markets do just fine, even in the presence of imperfections and rigidities.

The Keynesians were, and still are, unwilling to embrace the more radical conclusion arrived at by John Maynard; namely that, even if the free market system were purely competitive, there still would be no guarantee it would arrive at a full employment equilibrium.

For this reason, the Chicagoians were never quite the outcasts. This helps explain the ease with which their ideology was so quickly accepted in the 70s. It also helps explain why the economics of Keynes never moved to center stage.

The ideologies of the two eras never questioned the system’s ability to move toward that magical equilibrium. What instead happened was that the ideology that got the most play was the one most congenial to the structure of power of each corresponding era. But throughout both periods, the system’s capacity to move, of its own accord, toward full employment – even if only in principle – was never up to debate.

A near perfect graphical illustration of the power of economic theory is provided by the following graph; copied from RWER Blog

The impact of the roaring 20’s can be seen clearly as the shares of the bottom 90% drop steadily from 20% to around 13%, while the shares of the top 0.1% shoot up. The Great Depression led to a slew of regulations on banking, and also eventually the development and implementation of Keynesian ideas, which provide an economic rationale for government interventions to reduce unemployment. From 1930 to 1980, we see the rise of populist ideas, implementation of Keynesian theories, and the eclipse of Hayek and the Chicago School. After reaching a nadir in 1978, we see an upswing in the fortunes of the top 0.1%.